UNIVERSITY OF ECONOMICS INSTITUTE OF SOCIAL STUDIES HO CHI MINH CITY THE HAGUE VIETNAM THE NETHERLANDS VIETNAM - NETHERLANDS PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS DOES INCOME PER CAPITA AFFECT CARBON DIOXIDE EMISSIONS IN SOME EAST ASIAN COUNTRIES? BY PHAM THI THU HUYEN MASTER OF ARTS IN DEVELOPMENT ECONOMICS HO CHI MINH CITY, MAY 2012 i TIEU LUAN MOI download : skknchat@gmail.com UNIVERSITY OF ECONOMICS INSTITUTE OF SOCIAL STUDIES HO CHI MINH CITY THE HAGUE VIETNAM THE NETHERLANDS VIETNAM - NETHERLANDS PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS DOES INCOME PER CAPITA AFFECT CARBON DIOXIDE EMISSIONS IN SOME EAST ASIAN COUNTRIES? A thesis submitted in partial fulfilment of the requirements for the degree of MASTER OF ARTS IN DEVELOPMENT ECONOMICS By PHAM THI THU HUYEN Academic Supervisor: PHAM KHANH NAM HO CHI MINH CITY, MAY 2012 ii TIEU LUAN MOI download : skknchat@gmail.com iii TIEU LUAN MOI download : skknchat@gmail.com ACKNOWLEDGEMENT This thesis could not complete without considerable and kindly mental supports from my supervisor, Dr. Pham Khanh Nam, who spent his valuable time to help me to find materials, books and super my schedule tightly. He also response quickly as soon as I asked for help and give comments, which partly contribute to the success of this thesis. From bottom of my heart, I sincerely thank him for all.
I grateful acknowledge to Prof. Nguyen Trong Hoai, Dr. Nguyen Van Ngai and Dr. Phan Dinh Nguyen – Public Defense Committee for their important comments and explanations that support me to fulfill the thesis.
This study also benefits greatly from the enthusiastic assistance of Dr. Le Van Chon, whom I got knowledge on econometric and suggested the suitable models for the study. I would like to express my thanks for all students of MDE 16 for their unceasing assistance and encouragement during the course. I also show deep gratitude to the lectures, VNP staffs, library staffs for their helps in accumulating knowledge, accessing dataset and materials as well.
Last but not least, it gives my deepest grateful to my family members, husband, managers and colleagues for their dear encouragement, give favorable times and opportunities to finish the M.A course as well as the thesis. I pledge to bear full responsibilities for errors, omissions and shortcomings of the study. iv TIEU LUAN MOI download : skknchat@gmail.com TABLE OF CONTENTS CHAPTER 1: INTRODUCTION. Objectives of study.
Scope of the research. Structure of the thesis. 5 CHAPTER 2: EMPIRICAL AND THEORETICAL BACKGROUND. 9 CHAPTER 3: RESEARCH METHODOLOGY.
The conceptual framework. Dependent environment variables. 17 GDP per capita. 17 Foreign Direct Investment (FDI).
The Econometric model. 22 CHAPTER 4: DATA ANALYSIS. Carbon Dioxide Emissions and GDP for 6 East Asian countries. The Environment Kuznets curve (EKC).
Determinants of pollution. 40 CHAPTER 5: CONCLUSION AND POLICY IMPLICATIONS. Main findings and policy implications. Limitation of the research and recommendations for further study.
52 v TIEU LUAN MOI download : skknchat@gmail.com APPENDICES A: Summary of empirical studies on different the EKC hypothesis 57 B: Description of variables and data sources 71 C: Description of CO2 –GDP of six East Asian countries individually 74 D: Estimated results 78 E: Tests 82 LIST OF FIGURES Figure 2. The Kuznets Curve (1955) and the Environmental Kuznets Curve 7 Figure 2. The Environmental Kuznets Curve in N-shape 9 Figure 3. Conceptual framework of the study 14 Figure 4.
CO2 emissions for the period of 1990-2007 28 Figure 4. CO2 emissions and GDP for the period of 1990-2007 29 Figure 4. The EKC shape for six East Asian countries 37 Figure 5. An overview of determinants on environmental quality 48 vi TIEU LUAN MOI download : skknchat@gmail.com LIST OF TABLES Table 3.
Summary of variables description 21 Table 4. Summary Statistic on the sample observations 30 Table 4. Correlation on the sample observations 31 Table 4. Estimated results for the EKC with different models 33 (without time trend) Table 4.
A comparison of estimated results for the EKC with FEM 34 models Table 4. Estimated results for the EKC (N-shape) with FEM 36 Table 4. Estimated results for EKC with FEM time effects 38 Table 4. Estimated results for FEM with extended model (time 41 effects) vii TIEU LUAN MOI download : skknchat@gmail.com ABBREVIATIONS EKC : Environmental Kuznets curve FDI : Foreign Direct Investment NGOs : Non-government organizations CO2 : Carbon dioxide emissions per capita GDP : Gross Domestic Products GHG : Greenhouse gas OLS : Ordinary least square FEM : Fixed Effects Model REM : Random Effects Model X : Import M : Export NAFTA : The North American Free Trade Agreement viii TIEU LUAN MOI download : skknchat@gmail.com CHAPTER 1: INTRODUCTION 1.
Problem Statement For many centuries, the environmental degradation has become the issue of life with economic development. Since the industrial revolution began in 18th century, it was as a real problem. Industrial revolution with the technological progress brought great achievements, especially the worldwide usage of fossil fuels and coal in various industries. As a result, global economy has growth fast along with human who significantly consumed natural resources leading environmental quality is worsening seriously (Irina, 2008).
This implies that economic growth may affect environmental quality. Every nation wishes to pursue targets of economic growth without damaging environment. This is not feasible when history shows that any country becomes an industrial power, in the process of development, causing environmental damages, which cannot solve for a short time. In order to serve quick economic growth targets, the policies of incomprehensive industrialization and urbanization with massive exploitation of natural resources have caused environmental problems in these countries for recent years.
Consequently, the air pollutions and global warming have continuously increased by human’s uncontrolled activities in the development process. For China case, environmental degradation is becoming serious problems, which not only affects strongly to domestic but also causes international consequences. Some specialists judged that environmental pollution is creating challenges to government. It is also a long-term burden on the Chinese people and “China’s problem has become the world’s problem” (Kahn and Yardley, 2007, p.
In the current context, environmental problem is not for an individual country to cope with. It becomes the common hot issues and needs co-operation of worldwide countries because of its global matter. Kim (1996) revealed that due to the quick economic growth, environmental pollution has been in red alarm in China and it 1 TIEU LUAN MOI download : skknchat@gmail.com crosses the boundaries to South Korea and Japan. Especially, the global pollutants, in which carbon dioxide emissions are particular pollutant, causing global warming.
Carbon dioxide emissions have dramatically increased for recent century due to human economic development. Measuring environmental-economic relationship is necessary for any country to orient adequate economic- environmental policy. The Environment Kuznets curve (EKC) is reckoned as the best ruler in estimating this relationship since Grossman and Krueger made empirical study on the impact of the economic growth on environment in NAFTA countries in 1991. Under the EKC hypothesis, environmental quality changes with income levels.
It displays in a bell shape curve. Environment degrades with income levels in the first stage of development and then improves as soon as it passes a definite high-income level. Researchers use the EKC hypothesis commonly to connect economic growth with environmental reduction in both single countries and country groups with different models. Local pollutants and global pollutants are treated as dependent variables.
Beside income, other factors are applied as explanatory variables. Although the results are not the same for all studies, the economic growth links the environmental deterioration and vice versa. However, this theory has still been debated for years because various empirical studies found ambiguous results on the EKC but it has meaning for policy makers to find the best solutions for development sustainability (Dinda, 2004). In this study, the research concerns if fast economic growth affects the environmental quality in some East Asian countries, specifically six countries consist of three developing countries in Southeast Asia: Malaysia, Thailand, Vietnam and one developing country: China and two developed country in Northeast Asia: Korea and Japan, using cross- country balanced panel data set for the period of 1990-2007.
2 TIEU LUAN MOI download : skknchat@gmail.com Four developing countries are emerging economies. China is now one of the world’s largest economies with World Bank’s ranked by nominal GDP at the third in 2009, the second position in 2010 and predicts to keep the second rank in 20111. Thailand and Malaysia name in the second generation of newly industrialized economies. Vietnam is also thought as the third generation of newly industrialize economy with fast GDP growth in the period of 2000-2009.
While Japan and South Korea list the developed countries in East Asian region. These countries are not avoidable the environmental damages during the fast economic growth (Nguyen, 2009; Choi et al, 2010). One of the significant messages of the EKC is that it is not necessary to damage environment during the development and growth if there is suitable policy in technology application. Estimating the economic-environmental relationship bases on an EKC can make important sense in policy implications for six East Asian countries.
Developing countries like China, Thailand, Malaysia and Vietnam can get lessons and experiences from high income countries such as Japan and South Korea. The new emerging country like Vietnam draws more useful lesson in policy establishment from fast developing economies as China, Malaysia and Thailand in term of economic growth and environmental problems solving. This study suggests that there is the existence of an EKC for six East Asian countries. It means that income affects environmental damages and it will cure environment when income reach high level.
Rapid economic growth is vital but not necessary to damage environment. Moreover, empirical results shows that beside GDP per capita, other factors contribute environmental pollution. Foreign Direct Investment and Trade intensity have positive relation with CO2 emissions but they are not significant statistically. Population density is contrary.
Its coefficient has against sign as expected and has statistically significant at 10 percent level. There is a negative relationship between population density and CO2 emissions per capita. It 1 Data from World Development Indicator database, World Bank, 1 July 2011 (Available at http://siteresources.org/DATASTATISTICS/Resources/GDP.pdf) 3 TIEU LUAN MOI download : skknchat@gmail.com means that population density increases leading to reduce pollution. Further study with other pollutants and control variables are suggested reconfirming the EKC hypothesis and making firm policies for six countries.
Objectives of study The objectives related to six countries in East Asia (China, Vietnam, Thailand, Malaysia, Japan and South Korea) of the thesis include: To examine the existence of an Environmental Kuznets curve (EKC) for a group of six countries. To find the role of other factors beside income such as trade openness, foreign direct investment (FDI) and population density in determining environmental quality. To recommend general policies for sustainable development in term of environment and economy of six East Asian countries. Research questions Some questions should be presumed in this thesis as following: 1.
Does the Environmental Kuznets curve actually exist in a group of six East Asian countries? 2. Does income (GDP per capita) impact on the environmental quality in six East Asian countries? 3. What is the role of other factors beside income, such as population density, trade openness, foreign direct investment (FDI) affect the environmental quality in six East Asian countries? 4. What are recommendations to develop economy harmony with environmental protection in six East Asian countries? 4 TIEU LUAN MOI download : skknchat@gmail.
Scope of the research The research focuses on finding impacts of economic growth to environmental quality in six East Asian countries under the EKC hypothesis. They are China, Vietnam, Thailand, Malaysia, South Korea and Japan. The study only investigates in the period 1990-2007 because full data set before 1990 for some countries (Vietnam, Thailand and Malaysia) is not updated.